Kent Conrad

Mr. CONRAD

Mr. CONRAD. I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. CONRAD. I am happy to yield.

Mr. CONRAD. The Senator from New Jersey?

Mr. CONRAD. The Senator is exactly correct. We are going to a circumstance in which we will have 77 million senior citizens, more than double what we currently have. This is unprecedented in our history and perhaps it is one reason we have a hard time coping. It is not something we have ever seen before. Perhaps that is one reason we have a hard time understanding the dimensions of this change.

Mr. CONRAD. Certainly that is the conclusion I come to. We are taking this year alone $160 billion of Social Security trust fund surpluses and using it for other purposes. We are not paying down debt with it. We are not prepaying the liability with it. We are not investing it. We are taking it to use to fund operating expenses, including other tax cuts. Looking ahead under the President's plan over the next 10 years, we will take every penny of the Social Security trust fund surplus. We will not pay down debt with it, we will not prepay the liability, we will not invest it. We will use it to help finance these tax cuts. So we are taking payroll taxes, in part, and using them to fund an income tax cut that will go predominantly to the wealthiest among us. Some say to make that comment is class warfare. I don't think it is class warfare. I think it is a fact. You are taking payroll taxes from people and using it to fund income tax cuts for higher income people. What is most troubling is we are borrowing it all. That is leading us into a very deep deficit-and-debt ditch.

Mr. CONRAD. My colleague from New Jersey is one of the most sophisticated investors, one of the most sophisticated financial managers in America, with a track record that is clear for all to see. He headed one of the most prominent, most successful financial management houses in the world, and enjoyed an extraordinary reputation there. When the Senator speaks on the question of the effects of fiscal policy on our economy and the future strength of our economy, I think people would be wise to listen. Is the Senator seeking time?

Mr. CONRAD. I am happy to yield 5 minutes off the resolution to the Senator from New Jersey.

Mr. CONRAD. Mr. President, I don't know, honestly, what amendment our chairman is looking at, but it is not mine. I don't have spending in the amendment. I have not provided for the Democratic leader's plan--I have not. In the amendment the chairman is discussing, I have $150 billion of tax cuts, including $25 billion of refundables, which the chairman has in his own package. I have matched his own package on refundables. I have no spending. The only thing that, perhaps, he is looking at is in the early years, because I more front-end-loaded the plan. We have additional interest costs initially. But over the life of the plan, it is substantially less interest cost. This isn't a plan with spending in it; it is a plan that has tax cuts in it.

Mr. CONRAD. Yes.

Mr. CONRAD. The Senator is talking about my first amendment.

Mr. CONRAD

Mr. CONRAD. No. In fact, the plan I have endorsed would expand expensing for small business. I think that is a better course and would be a real stimulus. We should aggressively have a plan of small business expensing, expanding small business expensing in this year. I see Senator Allard is in the Chamber. Is he seeking time?

Mr. CONRAD. Let me just respond to that first. Look, we are not suggesting the budget process stop. No. We are saying there ought to be a point of order, a 60-vote point of order against new spending initiatives, unless for defense or homeland security, or for new tax initiatives, other than for a stimulus package. We are not suggesting the budget process stop. We are suggesting it proceed, but that it proceed with some restriction, some disincentive for new spending, other than for defense and homeland security, or for new tax cuts, other than for a stimulus package.

Mr. CONRAD. Part of the plan that I have endorsed would include enhanced depreciation for small business.

Mr. CONRAD. We are under a time limit. There needs to be a granting of time in order for Senators to have an opportunity to speak. Senator Nickles is not here at the moment. Perhaps he is on his way.

Mr. CONRAD. Mr. President, I rise to respond briefly to my colleague who spoke previously on the question of the budget before us. He put up a chart that showed just the effects in 2004 and said that the tax cut was not the biggest reason for the decline in our fiscal condition. But let us recall that the chart he put up was for 2004 alone. The President's proposals are not 1-year proposals. They are multiyear proposals. Two thousand four is one of the years where the tax cuts have the least cost and the least effect. The reason for that is the tax cuts that have already been passed and the tax cuts the President has proposed are back-end loaded. The biggest cost comes toward the end of the 10-year period. When we look at the whole 10-year period of 2001 going forward, what we see is a much different picture than our colleague from Idaho showed. There we see that the biggest single reason for the decline in our fiscal condition is the tax cuts. We can see, just as a reality test, the tax cuts already passed, including the interest cost, are $1.7 trillion. The tax cuts going forward, the President has proposed, including interest costs, are $1.96 trillion. That is a total of nearly $3.7 trillion. The decline in our fiscal circumstance is $7.7 trillion. So just as a reality test, the biggest single reason for the overall decline in our fiscal condition is the tax cuts. The next biggest is the spending that occurred because of the attack on this country, 27 percent. Twenty six percent is also revenue decline, revenue decline not attributed to tax cuts but because there was an overestimation of revenue. The smallest part of the reason for our declining fiscal condition is the economic downturn. Our colleague from Idaho also said that this budget balances by 2013. It does on a so-called unified basis. That is when you put all the money in the same pot--all the money from whatever source going in the pot, all the spending coming out of that pot. I have never believed that that is the right way to handle Federal revenue and Federal spending because, for example, the Social Security trust fund ought to be treated differently. All the money should not go in the same pot. You should not be taking operating expenses out of Social Security revenues. We didn't put on a payroll tax to raise revenue to pay for the other functions of Government. We raised payroll taxes in order to pay for Social Security benefits. In the year 2013, the amount of money from the Social Security trust fund that will be used to pay the operating expenses of the Federal Government will be $331 billion. That doesn't strike me as a balanced budget. No private sector firm could take the retirement funds of their employees and use them to fund the operating expenses of the company. If you tried to do that, you would be on your way to a Federal institution, but it would not be the U.S. Congress. On the issue of who benefits from the tax cut, the Senator showed percentage reductions for various income categories. But if we look at who gets the dollars, we get quite a different picture. This is from the Department of Treasury. It shows those earning $30,000 to $40,000 get, on average, $252. Those earning over $200,000 get $12,500. And if you earn over $1 million, you get an $88,000 tax cut. It is true that the wealthy pay a higher proportion of taxes in this country than do the rest of us, but they don't pay that much more. Our friends always want to exclude payroll taxes. The fact is, 80 percent of American taxpayers pay more in payroll taxes than they pay in income taxes. So that has been left out of the calculation completely. Finally, on the question of what do we do about our circumstance, I was glad that our colleague put up a chart that showed the revenue of the Federal Government and the spending of the Federal Government. It is both of those elements that create deficits. So if you have a tax cut that costs $100 billion, that adds $100 billion to the deficit just like if you spent $100 billion. In this budget proposal, even though we are already in record deficit, they propose cutting another $1.4 trillion. With interest costs, that will be an additional deficit of $1.7 trillion. I don't think you can stand up and be against deficits and, on the other hand, vote to explode them. You either walk the walk and talk the talk, or else you wind up where we are headed, which is into deep deficit and deep debt. The fact is that we are not making the choices that are going to be necessary. If we are going to have that level of tax cut, then you have to cut the spending to offset it, unless you want to put it on the charge card, create deficit. Finally, the Senator from Idaho indicated that some of us are advocating doing nothing. Well, I am not advocating doing nothing. I am advocating that, with our country in the position of record deficits, on the brink of war, with not a dime of war costs in this budget, it would be wise for us not to add new spending unless it is for national defense or homeland security--not to add additional tax cuts, unless it is for a stimulus package for the economy, until we know more about what this war cost might be. It seems to be common sense to me that we know more about our circumstances. I will offer an amendment tomorrow that does that. It at least creates a 60-vote point of order against new spending, unless it is for national defense or homeland security, and it will preclude additional tax cuts unless they are for a stimulus package because it seems to me to head off the cliff on the brink of war is extraordinarily unwise. With that, I thank the Chair. Does the Senator seek time?

Mr. CONRAD. Mr. President, I yield 15 minutes to the Senator from Washington.

Mr. CONRAD. Mr. President, let me just take a few moments to respond to my colleague, Senator Sessions, who is a valued member of the Budget Committee, I might add, and whom I serve with on the Ethics Committee. He has served there with real distinction as well. But we fundamentally disagree. That is what debate is all about. That is what democracy is all about. And that is what is healthy for the country. The Senator described the growth package on our side as puny, I think. Let me just say, here is the difference between our two plans for this year. I would describe the President's plan as puny for this year. Of the total cost of his plan, which is over $900 billion, less than 5 percent of it is for this year, at the time the economy clearly is weak and needs a lift. Our plan is more than twice as large as the President's plan for this year: $102 billion of economic stimulus. An analysis has been done by the distinguished economist Mr. Mark Zandi of Economy.com, comparing the lift our plan will give the economy over this year and next over the President's plan. It shows the plan we have provided will give almost twice as much in terms of economic stimulus in 2003 and 2004 as the President's plan. Interestingly enough, for the long term, he finds the President's economic growth plan actually hurts economic growth. Why? Because it explodes deficits and debt. It does not offset the cost of the tax cuts with spending reductions. It finances the tax cuts with borrowed money. Our friends on the other side seem to have fallen into this notion that you can borrow your way to wealth and economic strength. That has never been true in history. You cannot borrow your way to economic strength. It is as if you had decided you would go out and run up the credit cards and make believe you are wealthy. No, no, no. No, we are not going to buy into that new theory. Our friends on the other side of the aisle used to believe deficits matter. Many of us on this side still believe deficits matter. I am happy to say some on the other side still believe deficits matter. But it is not just Mr. Zandi who has found that the plan of the President will hurt economic growth in the long term. Macroeconomic Advisers, who is under contract to the White House, under contract to the Congressional Budget Office, to do macroeconomic analysis, has concluded that after 2004, the President's plan actually hurts economic growth. We would have less economic growth than if we did nothing. Now, that is not my idea of economic growth. I would say this to my colleague: The one thing that is certain about the plan on the other side, the thing that is going to grow is the deficit. The deficit is going to grow. We are already going to have record deficits under this plan, and they are going to continue as far as the eye can see. According to the President's own documents, we are never going to get out of deficit. It is just like falling off a cliff. Because the cost of the President's tax cuts explodes at the very time the cost of the Federal Government explodes by the retirement of the baby boom generation. But it is not just my view. Newspaper after newspaper--here is the Deseret News, in Salt Lake City: War is unpredictable . . . a long, protracted campaign that triggers counter-attacks by terrorists and Iraqi sympathizers could be hugely expensive. Coupled with giant tax cuts, it could send the budget deficit back into levels not seen in a decade or more, which would stifle growth and hamper investment. It isn't a growth plan they have on the other side; it is a grow-the- deficit plan, a grow-the-debt plan, that will hurt economic growth. Congress ought to put the president's tax plan on the shelf for awhile until it knows better how the men and women in uniform are going to be spending their year. Newspaper after newspaper. Here is the Philadelphia Inquirer: . . . [B]e careful what's given away in the name of any ``growth and jobs'' plan. Federal budget deficits are back. States are reeling from their own deficits while shouldering new homeland security chores. The demographic train wreck facing Social Security and Medicare as baby boomers age hasn't gone away just because politicians have stopped talking about it. Money is so tight President Bush can't pay for even his own cherished initiatives such as education reform. This is from the News & Observer, Raleigh, North Carolina: When the Republicans won the White House there was a projected surplus of about $200 billion for this fiscal year and talk about fully protecting Social Security and even digging out from beneath the national debt. Now, in large part because of the earlier Bush tax cut and necessarily higher spending for the anti-terrorism fight, the nation has plunged into red ink again. . . . In the meantime, President Bush goes on pushing hard to make tax-rate reductions permanent and to cease federal taxation of stock dividends. Both the federal and state budgets could face dire consequences from this economic plan. On and on it goes. ``Unfair tax proposal rewards wrong group.'' This is from the Kansas City Star: There's no real debate over the fact that Bush's proposal on dividends would largely benefit the rich. Some apologists talk about wanting to help the elderly, which doesn't tell the whole story; Bush's dividend proposal would help elderly people with lots of money in the stock market. Bush's tax package is unfair, short-sighted and fiscally irresponsible. He and members of Congress--particularly Republicans, who now control Capitol Hill--must develop a far better plan in the months ahead. Let me just finish with this one. I have many more because newspapers all around the country--not Democrats, not Republicans--that have tried to analyze the President's plan have come back and said it is a nonstarter. Here is the Los Angeles Times: . . . Bush's trickle-down package threatens to swamp the economy in a wave of debt. And that's before taking into account the huge but unknowable cost of preparing for and perhaps fighting a war with Iraq. The White House's tax-cutting yet free-spending ways defy history, and taxpayers will be the ones left responsible for decades to come. That is just a part of what the Senator from Alabama said that I think requires a response. He said some are saying: Do nothing. That is really not what Senator Daschle has proposed nor what I have proposed. But I do believe it would be wise, on the brink of war, when there is no provision in this budget for the costs of that war--and none of us are suggesting--I want to make clear to my colleague, if I could have his attention, none of us are suggesting this administration or your party has any intention but to fund our men and women in uniform. I have no doubt of that. I want to make very clear, we make no suggestion, none, that there is any reluctance to back our men and women in uniform. That is not the point. The point is this: When we are on the brink of war, and there has been no provision in the budget for the cost of that war, even though we know there are substantial costs associated with it, it seems unwise to some of us to increase spending, to have new spending initiatives-- except for defense and homeland security--or to have new tax cuts, unless they are for a stimulus package. That is the point we are making. And I think it is a wise one and a prudent one.

Mr. CONRAD. I am happy to yield for a question.

Mr. CONRAD

Mr. CONRAD. Mr. President, today we begin a fundamental and critically important debate on the fiscal future of our country. We do it as our country is poised on the brink of war. We do it when our country is now in record budget deficits. We do it at a time when we see challenges facing our country on many fronts. This is a debate of enormous consequence. I, first, thank our chairman of the Budget Committee, Senator Nickles, for the way he has conducted our committee. He is new as the chairman. He has walked into a difficult, challenging situation, but he has conducted himself as a real gentleman and we, on our side, appreciate that very much. He has also gathered an exceptionally good staff. We appreciate working with them as well. This debate is about the fundamental question of where this country will go in its fiscal future. We will decide whether this country will continue down the dangerous path of deficits, debt and decline, or whether we will take a step back toward fiscal responsibility, balanced budgets, and economic strength. In the 2 years since the Bush administration has come into office, our Nation has suffered a dramatic and disturbing downturn in our fiscal and economic affairs. We went from a position of unparalleled growth, job creation, and opportunity to one of deficits, growing debt, growing unemployment, and doubt about our Nation's economic future. This budget resolution that we will begin debating today will determine whether we continue on the path set by this administration, a path that is rapidly undermining our fiscal strength, or whether we begin to reverse this dangerous course. The budget resolution that we have before us, the majority passed out of the Budget Committee on a party-line vote, I believe is not the answer to what ails this country. It follows closely the President's proposal for massive tax cuts for the wealthiest among us that will only drive us deeper into deficit and debt. The chairman of the committee calls part of those tax cuts a growth package, which is what the President terms it. We respectfully disagree. I do not believe, and many on our side do not believe, that it is a growth package. We believe instead that it will inhibit growth because deficits and debt will explode and the heavy weight of those deficits and debt will hold down economic growth. When you run deficits, you reduce the pool of societal savings. When there is less of a pool of societal savings, there is less money available for investment. And without investment, you cannot grow. I think on both sides of the aisle we agree on that basic premise. The majority's resolution includes fully $1.4 trillion in new tax cuts, $726 billion for the so-called growth package, and more than $600 billion to make the President's 2001 tax cuts permanent. With interest costs, these tax cuts will add $1.7 trillion to the deficit. Let's make no mistake, these are not tax cuts that are being paid for by cutting spending; they are not tax cuts that come out of a surplus. They are tax cuts that will be funded by borrowing the money. I should also add, they will also be financed by taking over $2 trillion out of Social Security trust fund surpluses to pay for them. At a time when we are on the brink of war in Iraq, we face a crisis with North Korea, we face an ongoing global fight against terrorism and al-Qaida, deficits are at record levels and continue to grow, job losses are mounting, and the retirement of the baby boom generation looms just over the horizon, I cannot think of anything more irresponsible than enacting this plan. Now is a time that we should be focusing on strengthening our Nation's defenses and homeland security, improving our economy, and restoring fiscal discipline over the long term to assure that future generations are not saddled with these debts. If Congress were to actually adopt the plan before us, it would plunge the country off a fiscal cliff and threaten the education of our children, the financial security of our seniors, the stability of our economy, and the ultimate strength of our Nation. First of all, it disturbs me we are even considering a massive tax cut package at a time when we are on the brink of war. How can we call on our troops to be willing to make the ultimate sacrifice but ask for no sacrifice here at home to fund their endeavors? I do not think that sends the proper message, when our troops are in the field, on the brink of battle. Past Congresses and past Presidents have almost always called on the American people to help share the burden of conflict by buying Government bonds, by forgoing tax cuts, or even paying higher taxes to pay for a war. The American people proudly carried this burden and recognized it was their responsibility and a small price to pay for the privilege of living in the greatest and strongest country in the world. They certainly did not consider tax cuts for the wealthiest when their fellow countrymen were in battle and their Nation was in deep deficit and growing debt. Amazingly, despite the fact that we are on the verge of war, neither the President's budget nor the majority's resolution includes any resources for such a conflict. How can we consider cutting revenues by $1.9 trillion, with the interest costs included, as the President has proposed and have not one penny in the budget for the looming war? Some say, well, it is hard to predict what the war will cost. Indeed, that is true. But one thing we know for certain is the right number is not zero. But that is what is in this budget resolution--zero, zero for putting our troops in position to launch an attack on Iraq, zero for the conflict almost certain to come, zero for the reconstruction of that country, zero for the occupation. We do have estimates of what all those things cost. Before the Armed Services Committee, they were told in some detail that the costs of just having our troops in place, without going to war--just having them in place--between now and the end of September, would be from $64 to $84 billion. But there is not a dime in this budget. What sense does that make? Are we in total denial that having a quarter of a million troops poised for a war against Iraq is not going to cost anything? Surely we know that is not true. The cost is substantial, and we ought to provide for it in this budget. Let's consider just how much this war could cost. Officially, the administration has refused to provide Congress with a cost estimate. The press reports have cited administration officials acknowledging that they could request a supplemental appropriation of $60 to $95 billion to cover war costs in 2003 alone. This chart shows how much the administration could request in a supplemental for these war costs, and it shows how much has been put in the budget resolution before us. The number is zero. Mr. President, colleagues, we know that is not right. That should not be our budget for this looming war. And nowhere has the administration accounted for the possibly large postwar costs, such as occupation, humanitarian assistance, and reconstruction, not to mention any indirect costs to the United States, such as an extended spike in oil prices. That is why it is so important that Congress be provided with a war cost estimate before we proceed with large tax cuts or large new spending initiatives. Congress should have the information before we make these long-term commitments, not after. It is disturbing to read press reports that Republican leaders may be asking the administration to delay their supplemental request until these tax cuts are locked into a budget resolution. This is how Congress Daily reported the situation: Vice President Cheney met with Senate Majority Leader Frist [on] Thursday to discuss, among other things, the timing of a spending request on military action in Iraq. It is not expected that such a request would come until after the House and Senate complete floor action on the budget resolution, a key aide said. . . . [H]owever, having a supplemental that could total somewhere between $65 and $95 billion come up while the tax cuts and the budget resolution are being debated could threaten the Republicans' economic agenda. House leaders have also said they want the supplemental war request delayed as long as possible to provide breathing room between the tax cuts and war spending. If this report is accurate, and the war supplemental is really being held to give breathing room for the tax cuts, we are in worse shape than I even imagined. To understand why the majority's budget plan is, I believe, making incorrect assumptions with respect to the economy, it is worth reviewing what has happened to the budget over the last 2 years. When the President was advocating his first tax cut in 2001, he promised we could easily afford it. He ignored warnings that the tax cut he was proposing was too large. In a speech just 2 years ago, the President said: Tax relief is central to my plan to encourage economic growth, and we can proceed with tax relief without fear of budget deficits, even if the economy softens. He was wrong. We now know how wrong he was. Instead of the $5.6 trillion in projected surpluses over the next 10 years that were projected when the President came into office, now, according to the Congressional Budget Office's latest estimates, if we adopt the President's budget plan, we will face a $2.1 trillion deficit over that time period. That is a stunning downturn of nearly $7.7 trillion in just 2 years. I listened to our chairman give the reasons for this downturn. The one thing I did not hear him mention was the effect of the tax cuts. And yet the tax cuts over the 10-year period are the biggest single reason for this deterioration in our financial condition. What could be more clear? Let's just do the math. We were told we would have $5.6 trillion over the next decade in surpluses. Now we are told if we adopt the President's tax and spending plans, we will be $2.1 trillion in the hole over that same period. The tax cuts we passed in 2001 were $1.35 trillion plus the associated interest costs. If you reduce revenue, and that means you have more deficit and more debt, that means your interest cost goes up. The total cost of those tax cuts, about $1.7 trillion. Now the President comes before us with an additional $1.6 trillion of tax cuts over this period of time. The associated interest cost takes that to a total cost of $1.96 trillion. If you add the $1.7 trillion from the previous tax cuts, the $1.96 trillion from these tax cuts, you get almost $3.7 trillion; $3.7 trillion of the $7.7 trillion of deterioration. That is about 40 percent of the variance. That is the biggest reason. The second biggest reason is the increased cost associated with the attack on this country--increased defense cost, increased homeland security cost, which we all have supported. The third biggest reason, quite apart from tax cuts, is the economy is not throwing off the tax revenue anticipated for this level of economic activity. That is a simple mistake in the calculations. The fourth reason is the economic downturn. Those are the key reasons for this collapse in our fiscal fortunes. But let's be clear, the tax cuts are the biggest single reason. In last year's State of the Union address when this change in our fiscal fortunes was becoming more clear, the President saw what his policies were doing and he began to acknowledge that deficits had returned. He said then: . . . [O]ur budget will run a deficit that will be small and short-term . . . Again he was wrong. It is now very clear that the deficits will be neither small nor short term. In fact, the Congressional Budget Office has told us that the deficit would total $338 billion in 2004 if we were to adopt his plan. And if, as the law requires, we are to exclude Social Security from that calculation, the deficit in this coming year would be $512 billion. In fact, we would see throughout the rest of this entire decade deficits would never be below $400 billion. This chart shows it. This is what CBO told us back in May would occur without the President's policies, the top line. And we would have emerged from deficit in about 2011. If, instead, the President's policies are adopted, and this is the balance line, this is where you have no deficits, this is what happens if the President's policies are adopted. We never escape from deficits the entire rest of this decade, and they are not small. They are very large. In fact, they are record deficits, record in dollar terms, over $500 billion in 2004 alone on a budget of $2.2 trillion. That is a deficit of over 25 percent. That is not a small deficit. In 2001, the President gave a radio address to the Nation. He said then: . . . [M]y budget pays down a record amount of national debt. We will pay off $2 trillion of debt over the next decade. That will be the largest debt reduction of any [nation] ever. Future generations shouldn't be forced to pay back money that we have borrowed. We owe this kind of responsibility to our children and grandchildren. The President was absolutely right in his values and in his sentiment, but that is not what we are getting in terms of a policy. What we now see is endless deficit and endless debt passed on to our children and grandchildren. In fact, when he said he would virtually eliminate the debt back in January of 2001, he said there would only be $36 billion of debt left by 2008. Now we see, instead of almost eliminating the debt, it is growing. In fact, it will be over $5 trillion by 2008, over $5 trillion. That is just the publicly held debt. That doesn't include the debt we are running up to the trust funds of Medicare and Social Security, debts that will also be in the trillions and trillions of dollars. The consequences of this dramatic increase in debt are many. But one of them that hurts this Nation the most is the increased interest cost we will face. Back in January of 2000, we were told the interest cost during this period would be $622 billion. Now we see that instead of $622 billion, the interest cost will be $2.3 trillion; $1.7 trillion in interest cost, money that can't be used to build a destroyer to protect the Nation, money that can't be used to eliminate the terrorist threat to our country, money that can't be used to educate a child or feed a hungry person or do anything else that government does. Instead, it is wasted money, wasted in the sense it won't do anything positive other than pay our bills. That increase in debt, that increase in deficits is, to me, the greatest threat posed to our national economic security. Again, if we listen to President Bush, we know his heart is in the right place. In his State of the Union address this year he said he would not pass on our problems to future generations. He said then: This country has many challenges. We will not deny, we will not ignore, we will not pass on our problems to other Congresses, to other presidents and other generations. That is precisely what the President's budget plan, and what the budget plan before us, does. It passes on the burden to future generations. It asks our children to shoulder the debts we are running up. It is interesting to look at what the President's policies will do according to his own analytical perspectives. From page 33 in his budget, what this chart shows is the next 10 years, the budget sweet spot. Even though we are in very large deficit, even though we are in record deficit, even though the debt is mounting, we can see this is the good times because this is the chart from the President's own budget document looking out as far as 2050. What it shows is, if the President's policies are adopted, his proposals for tax cuts, his proposals for spending, we are going to take a leap off the cliff into deficits that are unsustainable and that are dramatic and that are devastating to this country's economic strength and economic future. We need to remember this is the worst possible time for us to be accumulating such a mountain of debt. This is precisely the time when we should be paying down debt, or prepaying the coming liability of the baby boom generation. When we look at the next two decades, we can see that the President's tax cut explodes in costs at exactly the same time the Social Security and Medicare tax surpluses disappear. Right now, the tax cuts are somewhat less than the trust fund surpluses from Social Security and Medicare. But look what happens when those trust funds go cash negative in the next decade. At the very time the trust funds of Social Security and Medicare go cash negative, the cost of the President's tax cuts explode. That is what this chart shows us. The blue bar, which is the smallest, is the Medicare surplus. Ultimately, it becomes Medicare deficits. The green bar is what Social Security is running now in surplus, which will also turn to deficits when the baby boomers start to retire. The red bar shows the President's tax cuts. What this chart shows is as clear as it can be. None of this adds up. It doesn't come close to adding up. Right now, while the trust funds are running substantial surpluses, those funds are being used to pay for the tax cuts and other expenditures of Government. They are not being banked. They are not being used to pay down our other debt so that we would be in a better position when the baby boomers retire. And those surpluses are not being used to prepay the liability we all know is to come. Instead, those trust fund surpluses are being spent. They are being spent to fund these tax cuts; they are being spent to fund other expenses of Government. Look what happens when we get out into about the next decade. Then as the baby boomers retire, the trust fund turns to cash negative, instead of throwing off big surpluses. For example, this year, the Social Security trust fund surplus is over $160 billion. That is real money--$160 billion in this year alone. But all of that is going to change when the baby boomers start to retire. Then the trust funds of Social Security and Medicare go cash negative. As the years progress, we go cash negative in a big way. That is the very time that the cost of the President's tax cuts explode. The result: massive deficits, massive debt. This chart is looking out to 2018, when we will have a deficit approaching a trillion dollars for that year alone. That is what these charts show. That tells me that this budget plan can only have one conclusion, and that is to take us on a course to massive cuts in Medicare, in Social Security, and in all the rest of Government. That is the only conceivable outcome of a policy that has been laid down by the President and that has been largely adopted in the budget resolution. I don't think that is the direction in which the American people want to go. But they need to know that the logic of this plan is inescapable. It is massive deficit; it is massive debt. The President has proposed what he calls an economic growth package. Clearly, we need to have an economic growth strategy. That is something on which we can all agree. We need an economic growth strategy because we have lost 2.5 million jobs in the private sector since January of 2001. Let's be clear. What has caused that? No. 1, economic downturn. No. 2, the attack on this country that made the economic downturn more severe. Those are the culprits in the near term for what has happened to us. So we simply must respond to 2.5 million jobs lost during that period of time. But the President has told us that his growth package, which doesn't cost $725 billion--when you include the interest costs, it costs $994 billion from 2003 to 2013--almost a trillion dollars of costs, only a very small part of it is effective this year when the economy is weak and needs a boost. This doesn't make sense to me, nor does it make sense to many economists. Clearly, we need a growth strategy. This is where the chairman and I are in complete agreement. We need a growth strategy. But we need a growth strategy that will really grow the economy, one that will provide lift at a time of economic weakness, but one that will return us to fiscal balance in the long term so we are not putting upward pressure on interest rates that would only slow economic growth and kill a stronger economic future. Some have said deficits don't matter, deficits don't affect the economy. Chairman Greenspan, head of the Federal Reserve, believes deficits matter. He said in testimony before the Senate Banking Committee: There is no question that as deficits go up, contrary to what some have said, it does affect long-term interest rates. It does have a negative impact on the economy, unless attended. Well, it is not just Chairman Greenspan who believes it. Mark Zandi, a well-respected economist with Economy.com has evaluated the Democratic plan for economic growth and contrasted it with the President's plan. What he concluded is that, in the short term you get more economic growth from the Democratic plan because we put more into giving lift to the economy now, when it is weak. He shows that, in 2003, we would have almost twice as much economic growth as the President's plan. The same is true in 2004. And perhaps even more interesting, he concludes that over the long term, the President's economic growth plan actually hurts economic growth. Let's be clear. We believe the President's so-called growth plan will help in the short term--not as much as our plan would, but it would help--but it actually hurts in the long term. Why? Because the tax cuts are not paid for by spending reductions in the President's plan. Instead, the President's tax cuts are financed by borrowing and taking the money out of the Social Security trust fund surpluses. That is a prescription for putting upward pressure on interest rates and for hurting long-term economic growth. Again, that is not just my view, that is not just the view of Mr. Zandi; it is also the view of Macroeconomic Advisers. They happen to be the group that is hired by the White House, hired by the Congressional Budget Office, to give long-term assessments of what different policies will do for economic growth. This is what they have said the effect of the President's plan will be. This chart shows the President's policy compared to the base. The base is the green line; the President's policy is the black line. What it shows is that in the short term the President's policy would increase economic growth--again, not as much as the Democratic plan; nonetheless, it would be positive. Over the long term, it would be worse than doing nothing. It would actually hurt long-term economic growth. Again, the reason for that is very simple. The reason is, if you finance these tax cuts with borrowing, you are increasing deficits, increasing debt, and that provides a dead weight on this economy. We have the Federal Government in there competing with the private sector to borrow money. That drives up the cost of borrowed money, drives up interest rates, and that hurts economic growth. It is just not my view, or the view of Macroeconomic Advisers, or Mr. Zandi; it has now been expressed by a group of the most distinguished corporate leaders in America. The nonpartisan Committee for Economic Development, a group of some 250 CEOs of major companies, has looked at the President's plan, and they have come forward with the following conclusions. I should emphasize the Committee for Economic Development is a nonpartisan, nonpolitical group of 250 leading businessmen and academics, a group composed of largely fiscally conservative business leaders and academics, including executives from the Bank of America, Bell South, Allied Signal, PricewaterhouseCoopers, Deloitte & Touche, Ford Motor Company, and many more. This group issued a report opposing the President's tax cut and noting that it would explode deficits and debt right in the face of the retirement of the baby boom generation. That is exactly right. Here is what they found. No. 1, current budget projections seriously understate the problem. No. 2, while slower economic growth has caused much of the immediate deterioration in the deficit, the deficits in later years reflect our tax-and-spending choices. So this is the debate between the chairman and me. He is saying the tax cuts are not the reason for the opening up of these deficits, and he is right, in the first few years of this 10- year plan. But over the full 10 years of the 10-year plan, the biggest reason for the return to deficits is the tax cuts. That is not just my conclusion, that is the conclusion of this group of corporate leaders. No. 3, deficits do matter. When you have to be borrowing money for the Federal Government, that puts the Federal Government in competition with the private sector and that puts upward pressure on interest rates, especially at a time when the economy is recovering. No. 4, the aging of our population compounds the problem. I do not know what could be more clear. We have record deficits now. The President says cut another $2 trillion out of the revenue base and do not offset it by cutting spending, but increase spending and do it when we all know the baby boomers are about to retire and will really explode costs to the Federal Government. What earthly sense does this make? We are cooking a stew here that will be impossible to choke down. We will be choking on deficits and debt in this country, and you do not have to just take my word for it. The President's own budget documents have reached precisely the same conclusion. They show we never emerge from deficit and that as the baby boomers retire and the costs of the tax cuts explode, the deficits mushroom, the debt grows geometrically to unsustainable levels. Let me put up the reasons for the decline we were discussing earlier. The reasons for the disappearance of the $7.7 trillion--remember 2 years ago, we had a forecast of $5.6 trillion of surpluses over the next decade. We now know, according to the Congressional Budget Office, if we adopt the President's tax-and-spending plans, instead of $5.6 trillion of surpluses, we will have $2.1 trillion of deficits. That is a swing of $7.7 trillion in 2 years. Where did the money go? Over the 10 years, 38 percent went to the tax cuts, those already passed and those proposed; 26 percent went to the problem of the models not correctly forecasting revenue for various levels of economic activity. That is apart from the tax cuts. It is less revenue, but not caused by the tax cuts. The two of them together are 64 percent of the reason for the disappearance of the surplus. Sixty-four percent is less revenue than anticipated. Most of it is the tax cuts, but the other is mistakes in forecasting. Twenty- seven percent of the reversal is additional spending caused by the attack on the country, the additional defense spending, and the additional spending for homeland security. Only 9 percent is the economic downturn. Now we have the Committee for Economic Development telling us that we are on a course that does not make sense. So we look at the proposal before us by the chairman of the Budget Committee that passed on a party-line vote out of the committee. What does it show us? It shows us that if you do not use Social Security, if you do not throw that money into the pot, if instead you treat it like a trust fund, if instead you protect it, if you treat Social Security as a true trust fund, the deficit in 2004 under the budget chairman's mark will be $503 billion out of a budget of approximately $2.2 trillion. That is a huge deficit. What we see is never emerging from deficit if we do not use Social Security for other purposes for the whole rest of the decade. In fact, we never get below $300 billion in shortfall on an operating basis. Where is the money coming from? Mr. President, $2.7 trillion is being taken from Social Security surpluses and used to pay for these tax cuts and being used to pay for the other expenses of Government. These chickens are going to come home to roost. This is a profound mistake, I believe. I believe we should have either used this money to pay down debt or prepay the liability we know is to come, but to take this money from Social Security surpluses when we are right on the eve of the retirement of the baby boom generation, we know what it is going to do. It is going to force incredible choices on a future Congress and a future administration. They are going to have to run up massive debt or have enormous tax increases or deep cuts to Social Security and Medicare. This is reality talking now, and it is a hard reality, but it is something we have to face up to. Instead of paying down debt, here is what is happening to the gross Federal debt. It is exploding. It was $6 trillion in 2002. If we adopt the chairman's mark, it will be $12 trillion at the end of this budget period; $12 trillion in debt. The chairman said the tax proposals of the President are not weighted to those at the top. I must say I differ. I do not know what tax plan he is studying, but the tax plan I look at that the President has advocated shows the overall tax cuts are almost totally weighted to the top end. This is from the Center on Tax Policy, and it shows that taxpayers with over $1 million of income a year will get an $88,000 tax cut--$88,873. That is pretty generous. Taxpayers who are in the middle of the income scale, those earning from $21,000 to $38,000, get a $265 tax cut. If that is not weighted to the top, I do not know what is. By the way, this AGI, adjusted gross income, of $21,000 to $38,000, is 20 percent of taxpayers who are in the middle of income distribution in this country. They take the income of all those in America and divide them into groups of 20 percent. The group that is in the middle 20 percent has an adjusted gross income of between $21,000 to $38,000. They get very little by way of this tax cut. Those at the top--and, of course, people earning over $1 million a year are in the top 1 percent of this country--get a tax cut of over $88,000. This is trickle-down economics all right. It did not work before, and I do not think it will work now. This shows the benefit by quintile of the President's proposal. It shows the bottom 20 percents get two-tenths of 1 percent of the benefit; the second 20 percent gets 10.8 percent; the third 20 percent get 23 percent; the fourth 20 percent get 32 percent; the top 20 percent get a third of the benefit. So that is clearly heavily weighted to the top. I conclude by saying I hope we pause, think, and reflect about what adopting these policies would mean to the economic future of the country. I think these are fateful decisions that are about to be made, fateful decisions that will have an effect on this country for many years to come. I very much hope that before we are finished our work on this budget resolution that we change course, that certainly we enact a growth package, one that includes tax cuts, one that gives a lift to the economy but one that does not burden us with deficit and debt for years to come; that we return to an understanding that fiscal responsibility is critical to long-term economic growth. That must be the conclusion that we come to during this debate on the budget resolution. I yield the floor.

Mr. CONRAD. Mr. President, let me indicate when one is assessing effective tax rates on corporations, it is a very tricky business. The chairman is citing the tax rates found in the tax tables. But those are not the effective tax rates that companies pay. It gets to be much more complicated than it appears superficially in terms of top rates. For example, the chairman is making the point regarding everyone who has retirement account benefits. Our employees benefit--although they are, for the most part, well-to-do people--from the dividend taxation proposal. The way tax law works, they do not pay those taxes in a retirement account. Those are tax-free accounts. They are not paying the dividend tax. It might be true they would benefit if the value of the stocks went up, but that is very much a crapshoot. No one knows for certain what the effect of a dividend tax proposal would be in terms of stock valuation. But we do know the effect on deficits and debt. It will drive up deficits. It will drive up debt. Many Members believe, and many economists believe, increased deficits and increased debt will inhibit long-term economic growth, not improve it; it will hurt people, not help people. When the chairman talks about lower income people getting a bigger percentage reduction in their income taxes than higher income people, that leaves out a profoundly important point. That is, most lower income people--in fact, most taxpayers--pay much more in payroll taxes than they pay in income taxes. There is no payroll tax relief in this plan. It is all geared to income taxes. Automatically, that is giving the greatest benefit to those who are the best off. When you take all the President's proposals together and evaluate who the big beneficiaries are, it is indisputable that it is heavily weighted in the top end. Certainly, the dividend top proposal is weighted in the top end heavily, and that is half of the President's so-called growth package. I will yield the floor so colleagues have their chance to express their views on the budget resolution before the Senate.

Mr. CONRAD. I am pleased to yield 25 minutes to the Senator from Massachusetts.

Mr. CONRAD. I will be happy to provide to the Senator whatever time he consumes.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today, joined again by my colleague Mr. Nickles and many others, to introduce important legislation to provide a 10-year depreciation life for leasehold improvements. Leasehold improvements are the alterations to leased space made by a building owner as part of the lease agreement with a tenant. This is a common sense move that will help bring economic development to cities and towns around the country that want to revitalize their business districts. It will allow owners of commercial property to remodel their buildings to better meet the business needs of their communities--whether for new computer ports and data lines for high- tech entrepreneurs, or better lighting and sales space for retailers. In actual commercial use, leasehold improvements typically last as long as the lease--an average of 5 to 10 years. However, the Internal Revenue Code requires leasehold improvements to be depreciated over 39 years--the life of the building itself. Economically, this makes no sense. The owner receives taxable income over the life of the lease, yet can only recover the costs of the improvements associated with that lease over 39 years--a rate nearly four times slower. This preposterous mismatch of income and expenses causes the owner to incur an artificially high tax cost on these improvements. The bill we are introducing today will correct this irrational and uneconomic tax treatment by shortening the cost recovery period for certain leasehold improvements from 39 years to a more realistic 10 years. The proposal being offered today would apply to property placed in service after September 10, 2004, in order to provide a smooth transition from the temporary bonus depreciation system enacted as part of the Job Creation and Worker Assistance Act of 2002. This legislation would more closely align the expenses incurred to construct improvements with the income they generate over the term of the lease. By reducing the cost recovery period, the expense of making these improvements could fall more into line with the economics of a commercial lease transaction, and more building owners would be able to adapt their buildings to fit the needs of today's business tenant. It is good for the economy to keep existing buildings commercially viable. When older buildings can serve tenants who need modern, efficient commercial space, there is less pressure for developing greenfields in outlying areas. Americans are concerned about preserving open space, natural resources, and a sense of neighborhood. The current law 39-year cost recovery period for leasehold improvements is an impediment to reinvesting in existing properties and communities. Shortening the recovery period will make renovation and revitalization of business properties more attractive. That will be good not just for property owners, but also for the economic development professionals who are working hard every day to attract new businesses to empty downtown storefronts or aging strip malls. And it will be good for the architects and contractors who carry out the renovations. I urge all Senators to join us in supporting this legislation to provide rational depreciation treatment for leasehold improvements.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today, joined again by my colleague Mr. Nickles and many others, to introduce important legislation to provide a 10-year depreciation life for leasehold improvements. Leasehold improvements are the alterations to leased space made by a building owner as part of the lease agreement with a tenant. This is a common sense move that will help bring economic development to cities and towns around the country that want to revitalize their business districts. It will allow owners of commercial property to remodel their buildings to better meet the business needs of their communities--whether for new computer ports and data lines for high- tech entrepreneurs, or better lighting and sales space for retailers. In actual commercial use, leasehold improvements typically last as long as the lease--an average of 5 to 10 years. However, the Internal Revenue Code requires leasehold improvements to be depreciated over 39 years--the life of the building itself. Economically, this makes no sense. The owner receives taxable income over the life of the lease, yet can only recover the costs of the improvements associated with that lease over 39 years--a rate nearly four times slower. This preposterous mismatch of income and expenses causes the owner to incur an artificially high tax cost on these improvements. The bill we are introducing today will correct this irrational and uneconomic tax treatment by shortening the cost recovery period for certain leasehold improvements from 39 years to a more realistic 10 years. The proposal being offered today would apply to property placed in service after September 10, 2004, in order to provide a smooth transition from the temporary bonus depreciation system enacted as part of the Job Creation and Worker Assistance Act of 2002. This legislation would more closely align the expenses incurred to construct improvements with the income they generate over the term of the lease. By reducing the cost recovery period, the expense of making these improvements could fall more into line with the economics of a commercial lease transaction, and more building owners would be able to adapt their buildings to fit the needs of today's business tenant. It is good for the economy to keep existing buildings commercially viable. When older buildings can serve tenants who need modern, efficient commercial space, there is less pressure for developing greenfields in outlying areas. Americans are concerned about preserving open space, natural resources, and a sense of neighborhood. The current law 39-year cost recovery period for leasehold improvements is an impediment to reinvesting in existing properties and communities. Shortening the recovery period will make renovation and revitalization of business properties more attractive. That will be good not just for property owners, but also for the economic development professionals who are working hard every day to attract new businesses to empty downtown storefronts or aging strip malls. And it will be good for the architects and contractors who carry out the renovations. I urge all Senators to join us in supporting this legislation to provide rational depreciation treatment for leasehold improvements.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise to engage the distinguished leadership of the Foreign Relations Committee in a colloquy. Mr. President, for the past several years I have been increasingly concerned about the ``loose nuke'' threat presented by the Russian Federation's arsenal of non-strategic or ``tactical'' nuclear warheads. Unlike strategic nuclear forces, intermediate range nuclear forces, or even conventional forces in Europe, tactical nuclear arms are not covered by any arms control treaty. There are no formal negotiated limits of any kind, no way to hold current and future Russian leaders to the unfulfilled promises of steep reductions made by former Soviet President Gorbachev and former Russian President Yeltsin more than a decade ago. In fact, we do not even have a good estimate of how many tactical warheads Russia has because the United States has no inspection rights. Unclassified estimates of the current Russian stockpile have ranged widely, from 7,000 warheads to 18,000 warheads-- four to eleven times as many as the United States. I am very troubled by the insufficient security at Russian nuclear warhead storage facilities and al Qaida's known interest in acquiring these horrific weapons. Am I right to understand that my colleagues share this concern?